Gulphs in Mankind’s Career of Prosperity: A Critique of Adam Smith on Interest Rate Restrictions

Abstract

This a selection from Jeremy Bentham’s Defence of Usury (1787), a classic critique of Adam Smith’s endorsement of legal maximum rate of interest. Bentham’s main point against the restriction is that “projectors” generate positive externalities. The extract offers economic argumentation involving social embeddedness, asymmetric interpretation, imagination, error and correction, discovery, local knowledge, learning by doing, experimentation and selection, human folly and delusion, critical discussion as a means of testing commercial interpretations and selecting judgments, distinction and demonstration of genius and courage, as opposed to profits, being a motivator of commercial success, the distinction between voluntary and coercive action, and the moral and cultural merits of liberty.